They say the US is the land of the free – while the land might not literally be free, it’s certainly much more affordable than anything in Canada that’s not covered in snow for 12 months of the year. The idea of investing in another country is scary for most and understandably so. Whether it’s the US or Japan, different countries have different tax rules, legal systems and cultures. While it might seem overwhelming at first, once you do just a little bit of reading and learning about a country you start to see that they do things very similar to the way we do things here in Canada. Especially when you look at our neighbor in the US. And once you learn the differences it opens up an entire new world of investing opportunity and deals for you.

So, let’s address the top 5 fears Canadians have about investing in US real estate to start your journey on opening up this new world of investment opportunity

1. Legal Ownership of US Real Estate

“Are Canadians even allowed to buy and own US real estate? Don’t you need to be a US citizen?”

A lot of Canadians are surprised to hear that you can even own US real estate. They hear about their uncle owning a place or snow-bird grandparents that own a home down in Florida but often think there must be some sort of catch. We’re Canadian after all, we can’t just go buy a place in another country.

Actually, you can. And you own it just like you own your home in Canada. The title is under your name, the mortgage is in your name, and you can put all the strange knickknacks and family pictures you want in it. In fact, anyone can own property in the US – regardless of citizenship. There are a couple of extra rules you should know regarding how long you can legally stay in the house – but you can own real estate in the US just as you would in Canada.

2. Currency Exchange Risk: Fear of fluctuations in exchange rates impacting the value of their investments

“It doesn’t make any sense to buy in the US, our dollar is worth nothing over there.”

The average exchange rate for the US to Canadian dollar over the last 10 years is 1.29. So in other words, historically one Maple Leaf has only been worth $0.77 US dollars. So why would someone want to invest in a country where their dollar is worth only 77 cents?

The reason is because the low cost of housing in the US more than makes up for this difference – let alone how many more real estate opportunities there are in the US. Even looking at housing prices at a national level (so including the outlier areas like California and New York City) the prices for Canadian home prices are roughly 75% more expensive than in the US:

So even if the Canadian dollar is worth on average 30% less than the US dollar, the houses in the US are on average 75% cheaper than in Canada. Factoring in the exchange rate that’s still like having a 40% off sticker on every deal over there.

3. Mortgage Financing

“I have no credit score in the US, there’s no way anyone is giving me a mortgage”.

It is true that you likely don’t have a credit score in the US. In order to build credit in the US you need either a Social Security Number (very similar to a Social Security Number – SIN in the US) or an Individual Taxpayer Identification Number (ITIN) as well as a US address. But many Canadians don’t know that many of the big banks in Canada (TD, RBC, BMO, etc.) offer mortgage products that use your Canadian credit history to give rates for mortgages in the US. Not only do you get to use the banking platform you’re already comfortable with but also use your great Canadian credit score and assets to get competitive mortgages in the US. Once you have your first US property then you can use that address if you want (and get an ITIN number) and then start building US credit – opening up all the US banking options in the US for future deals.

4. Double Taxation

“I’ve heard that all the money I make in the US gets doubled tax, once in the US, then again in Canada.”

This is a huge pitfall that most Canadian investors fall into when they start investing in the US. In some situations it’s true – you can indeed get double taxed on the income you make in the US – it’s not some myth, it can happen. But it’s not because of how much money you make, what state you’re investing in, or because of your specific tax situation. It’s simply a function of how the income gets to your bank account. If you just have a bunch of money coming into your Canadian bank account that comes from the US the CRA will not be happy about that and you’ll fall into the double taxed situation. But there a lot of easy-to-setup and low-cost solutions to avoid this so that the money that comes to your bank account does so in a CRA-approved way that won’t result in be double taxation.

5. Property Management

“If I own a place in Texas, who’s going to watch over the place? What if a pipe bursts and no one is there?”

Managing a property from afar can seem daunting, but with the right strategies and tools in place, it’s never been easier. Depending on the type of real estate investment this the option you pick will vary but there are a number of solutions for owning and managing a property remotely.

One very common approach is to hire a reliable property manager. Hiring a reputable property management company with defined channels of communication to keep you in the loop at all times ensure that your property is well-maintained in your absence. Another solution is to leverage technology for remote monitoring. There are a number of easy to setup and reliable smart home devices, security cameras, and property management software that can provide real-time updates and alerts, giving you peace of mind and control from a distance. In the age of smart home devices, smartphones, high-speed internet, it’s never been easier to manage a property remotely.

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There are a ton of common misconceptions and fears about owning real estate in the US. The purpose of this article was to show you that these fears are “a mile wide but an inch deep”. It looks impossible at first -like a sea of problems and obstacles to overcome stretching a mile wide. But once you take your first step you realize the water’s only an inch deep. Sure, you might get your shoes a little damp but the whole process is so much easier than it looks once you learn the basics.

Let us help you with your first step, teach you these basics, and help you avoid all the costly mistakes most Canadians make. Try our online course – Fundamentals of Cross-Border Real Estate Investing. We’ve put years of experience and knowledge into an easy-to-follow course that takes you through each step in the process. Not only do we make sure you avoid all the common mistakes outlined in this article but also make sure you maximize your investments and so much more.

Topics covered in the course include:

• Obtaining Financing
• Protection against liability
• Cross-border taxes/tax efficiency
• Long-distance real estate investing strategies
• And more!